The Irish giant reported strong growth in revenues – up 16.6% from €3.17 billion in 2018 to €3.87bn in 2019 – on the back of strong performance from its ingredients division Glanbia Nutritionals division and from the acquisitions of SlimFast and Watson.
However, profits after tax and exceptional costs fell by 23% to €180.2m – down from €234m in 2018 – as challenges in the Glanbia Performance Nutrition division, which sells branded sports nutrition products including Optimum Nutrition (ON), Isopure and BN, continued.
It reported pre-exceptional EBITA of €276.8 million – down by 7.8% from €284.9 m in 2018.
Commenting on the results Siobhán Talbot, group managing director, said its Glanbia Nutritionals (GN) ingredients segment saw broad-based volume growth “with notable performances in vitamin and mineral blends, and healthy snack ingredients, underlining the continued consumer shift towards health and wellness.”
She added that the performance of its Performance Nutrition (GPN) segment was ‘disappointing’ - revealing that the company has conducted a comprehensive business review “and are taking actions to simplify our business, allowing us to concentrate on our core brands, and optimising our routes to market across channels and geographies.”
The company initially cut its earnings guidance for the 2019 year in July after its Performance Nutrition sales volumes were weaker than expected. Shares in the company, down 22% since the profit warning last July, and down 40% in the last year, initially dipped by 3.6% to €10.15 at 08.30 GMT today but were 2.56% higher than previous close at €10.83 by midday.
Nutritional solutions growth
According to Glanbia, it’s GN revenue increased by 23.4% in full year 2019 versus prior year with a strong performance across both dairy and non-dairy solutions.
The division is a global provider of nutritional and functional premix solutions for use in healthy snacks, bars and beverages.
Growth was driven by a 7% increase in volume, 3.8% increase in pricing and the Watson acquisition contributing 12.6% to revenue growth, said the company.
“Volume growth was broad based with a strong performance in Asian markets for vitamin and mineral blends and in the US for dairy-based healthy snacking ingredients,” it added.
Performance Nutrition hit
Glanbia said declines in overall in profits were driven by lower performance from GPN which encountered challenges in international markets throughout 2019 as well as lower sales in the North American. Profits for the division, reported as pre-exceptional EBITA, declined by 19.6% - from €173.1 million in 2018 to €146.4m in 2019.
Despite a 20% decline in profits, GPN saw revenue growth of 11%, driven by the contribution of SlimFast and increased GPN revenues by 20.6% in 2019 offset by a volume decline of 9.0% and pricing decline of 0.6%.
The company revealed revenues for branded products declined by 9.8% in 2019 on a like-for-like basis – driven by an 8.9% volume decline and 0.9% pricing decline.
Currency and tariff headwinds in major non-US markets, including Brazil, the Middle East and India, proved to be another key consideration, while a stronger-than-expected shift away from specialist retailers to online sales in Europe also had an impact, said the company.
“In light of the significant performance issues in GPN in 2019 a comprehensive review of this business’s brand strategy, route-to-market and business model took place in H2 2019,” said the company in its full year results.
On the back of its review Glanbia outlined several steps it will take to simplify and improve performance of its performance nutrition range.
It revealed multiple measures taken to improve the GPN business, included exiting low margin areas, optimising routes to market, and splitting the management of the division into four new groups.
The ongoing improvement of the business unit will be driven by three core strategies, said the company:
- Simplification and exit of low margin businesses – including SKU rationalisation of the lowest performing products
- Supply chain optimisation
- A refined approach to innovation that drives demand for higher margin opportunities across the branded portfolio.
The four new groups within GPN will be: North America Performance Nutrition, North America Lifestyle, International and Direct-to-Consumer businesses.
Glanbia added that branded revenue growth will be achieved through prioritisation of three key brands: ON, SlimFast and direct-to-consumer platform Body & Fit.
“As part of an overall programme to simplify and decomplex the business, GPN has significantly reduced the number of SKUs in the North America branded portfolio to provide greater focus on its core ON brand,” said the company – adding that GPN will continue to support the BSN and Isopure brands in specific channels and consumer segments.
GPN also said it will exit the majority of its contract manufacturing business during H2 2020 and 2021 – an activity that accounted for 5% of total GPN sales in 2019.
Glanbia group managing director Talbot said the company expects GPN to regain branded revenue growth momentum in 2020 as a result of the changes.
“We are confident that the actions being taken will position the company to generate enhanced shareholder value in a growing healthy nutrition market.”